Investors active in metro housing in 2011

Nearly four years after metro Atlanta’s housing market collapsed, investors are playing a large, but hard-to-define role in the region’s recovery.

Industry analysts said it is difficult to quantify just how large a role institutional and individual investors are playing in metro Atlanta’s 2011 home sales.

But anecdotal evidence suggests their role is significant, potentially propping up prices for both homes and undeveloped land lots.

“Without investors, the market would really be stagnant,” said Mitch Kaminer, Realtor at RE/MAX Paramount Properties and president of the Atlanta Board of Realtors.

Investor groups accounted for 5,259 home purchases in bank sales in 2011, a 15 percent increase from 4,559 in 2010, according to data collected by Bridge Interactive Group LLC, a real estate research firm. The sales accounted for roughly 12 percent of all home purchases from banks in 2011 in the metro area, according to Bridge Interactive, and have risen each of the last three years.

And investors in troubled land and distressed homes fall into two groups, local real estate observers said: individuals and institutions.

Individual investors mirror those seen during the real estate boom, real estate agents said. Those buyers look to buy foreclosed homes, typically for less than $100,000 as a quick flip investment.

These buyers, real estate agents said, are looking to take advantage of the historically low prices created by the foreclosures. Often, these buyers are renting homes out to cover their own costs of buying the property, sometimes to former homeowners who have moved back to renting, agents said.

In 2011, there were roughly 24,000 bank-owned home sales in metro Atlanta’s 11-county region, according to Bridge Interactive. Real estate agents said that, anecdotally, individual investors are playing a significant role in those lower-end home purchases.

But institutions, backed by investors’ money from across the country, have also focused on the Atlanta area.

Institutional investors are typically buying land lots with the goal of selling them to builders within 18 months to three years, said Norman Richie, vice president for land at Batson-Cook Realty. Richie specializes in land sales to builders and investors.

Mason Maynard, CEO of Bridge Interactive, said many of the 20 most active institutional investors during 2011 were “barely in the market” before last year.

Those investors are betting Atlanta’s recovery — given its long-term population and work trends — will be more favorable, and maybe happen quicker, than other parts of the country.

For some, that’s a strategy that has backfired since the financial crisis of 2008 threw the U.S. housing market into chaos.

“Some investors overpaid in 2009,” Richie said, noting that investors who bought during that period now see prices for some land lots and homes selling for a percentage of market rates two years ago.

Richie said demand for land in certain Atlanta regions — including north Fulton, east Cobb and south Forsyth counties — is beginning to outstrip supply.

In those areas, Richie said, builders are competing to buy lots from investors and banks, and the competition can be fierce.

Some builders attempting to build homes to meet certain price points, he said, have been pushed from those areas to further away from Atlanta’s center. A builder, for example, looking to build in south Forsyth County is now likely looking for lots in central Forsyth due to rising lot prices.

The mix of investors and builder activity, he said, has created a relatively healthy land market in those areas.

But investor appetite for metro Atlanta lots is not universal, with buyers uninterested in areas that may take longer to recover.

Richie said some counties further from the city center, like Paulding County, will have undeveloped lots held by banks for years to come.

Investors, he said, have little interest in those lots, because of the ready supply of land and homes closer to Atlanta’s core, and they will be hesitant to buy into those areas without the promise of a quick turnaround.

Those lots, Richie said, do not make sense for investors to buy because they could hold those land parcels until the end of the current decade as current home construction trends indicate Atlanta’s recovery will be steady, but slow and methodical.

That length of investment, he said, does not work for investors “even if they can get the lot for free” given the long-term maintenance, taxes and other costs associated with such relatively remote lots.

Instead, investor interest in those areas is likely to increase much like it did during the housing boom.

Buyers will be interested in those counties only as prices skyrocket and supply shrinks in more attractive areas inside the city.

“Nobody’s optimistic enough to think it’s a rocket ship taking off again,” Richie said. “But those that made it really do think the worst is behind us.”